TIDMEST
RNS Number : 8347W
East Star Resources PLC
23 August 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF REGULATION 2014/596/EU WHICH IS PART OF DOMESTIC UK
LAW PURSUANT TO THE MARKET ABUSE (AMMENT) (EU EXIT) REGULATIONS (SI
2019/310) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT,
THIS INSIDE INFORMATION (AS DEFINED IN UK MAR) IS NOW CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES,
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JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION.
East Star Resources Plc
("East Star" or the "Company")
Half Year Report for the Period Ended 31 May 2022
East Star Resources Plc (LSE:EST), the Kazakhstan-focused gold,
rare earths and copper explorer, is pleased to present its interim
results for the six-month period ended 31 May 2022.
Highlights
-- Re-listed as a Kazakhstan-focused gold and copper explorer on
10 January 2022 following completion of the acquisition of
Discovery Ventures Kazakhstan Limited ("DVK") and an oversubscribed
fundraising of GBP3.1 million
-- Alex Walker, CEO of DVK, appointed Director and CEO of the
Company (based full time in Kazakhstan)
-- Announced on 26 January and 16 May 2022 assay results from RC
drilling in September 2021 on the Apmintas Licence in the Chu-Ili
gold belt including a "discovery hole" returning 63m at 4.51 g/t Au
from surface, including 19m @ 14.36 g/t from 44m and anomalous gold
across all Eshkilitau occurrences, confirming a gold bearing system
with a strike of more than 4km
-- Announced on 3 February 2022 historic data which added a new
target on the Apmintas Licence - Southern Shabdar - to the 2022
drill campaign
-- Announced on 4 February 2022 the award of a diamond drilling
contract for 5,000m of drilling in 2022 focused on the Chu-Ili
Orogenic Gold Belt
-- Announced on 7 March 2022 the completion of processing of
481km2 of close spaced drone magnetics flown in September 2021 over
the Dalny Licence resulting in 11 target areas prospective for gold
mineralisation being identified
-- Announced on 8 March 2022 historical drill results acquired
over the Eshkilitau II target on the Apmintas Licence resulting in
the target being added to the 2022 drill programme
-- Announced on 13 April 2022 the completion of processing of
380km2 of closed spaced drone magnetics flown between July and
October 2021 over the Apmintas Licence resulting in 22 target areas
prospective for gold mineralisation being identified
-- Announced on 18 May 2022 a farm-in for up to 90% of the
Talairyk Ionic Adsorption Clay (IAC) Heavy Rare Earth Element
(HREE) project in the Kostanay region of Kazakhstan
o Low-cost and zero cash payment entry to a geologically
de-risked IAC hosted HREE deposit
Post Period End
-- Announced on 30 June 2022 high grade assay results from rock
chip samples taken during geological surveys conducted over the
Alatagyl target on the Dalny Licence
-- Announced on 6 July 2022 the completion of 3,640.2-line km of
helicopter electromagnetic survey conducted over the Rudny Altai
volcanogenic massive sulphide ("VMS") belt licences
o Included 153.5-line km of 100m spaced infill survey over three
target areas with particularly strong electromagnetic
conductors
-- Announced on 25 July 2022 the commencement of diamond drilling on the Apmintas Licence
-- Announced on 8 August 2022 the award of an additional
134.7km(2) exploration licence at the Talairyk rare earths project,
also prospective for Ionic Adsorption Clay (IAC) hosted heavy rare
earth elements
-- Announced on 15 August 2022 the award of three new licences
on the Rudny Altai VMS belt, incorporating two historic operating
copper-lead-zinc mines, one known deposit, and many historical
mineral occurrences
-- Announced on 18 August 2022 an interim drilling update on the
Apmintas licence detailing the completion of four boreholes
totalling 970 metres being drilled on the Novoe target. The
boreholes showed wide intersections of quartz diorite containing
interspersed quartz veining and sulphides with some more intense
sections of alteration
Sandy Barblett, Non-executive Chairman, commented:
"Considering East Star re-listed just seven months ago, the pace
and quality of progress in Kazakhstan has been exceptional and I
would like to commend the executive team for their efforts. Being
able to move this swiftly to secure new opportunities such as the
rare earths project and additional VMS licences, or to oversee
geophysical work such as the under-budget EM survey on the VMS
licences, is precisely why the CEO is stationed in Kazakhstan
giving the Company a genuine first-mover advantage and the ability
to get things done. If you believe, as we do, in the extraordinary
mineral exploration potential of Kazakhstan, there is no other
pure-play listed explorer with boots on the ground through which to
access this opportunity - this is an incredibly exciting period for
the Company and our shareholders."
For further information visit the Company's website at
www.eaststarplc.com , or contact:
East Star Resources Plc
Alex Walker, Chief Executive Officer
Tel: +44 (0)20 7390 0234 (via Vigo Consulting)
Peterhouse Capital Limited (Corporate Broker and Placing
Agent)
Duncan Vasey / Lucy Williams
Tel: +44 (0) 20 7469 0930
Vigo Consulting (Investor Relations)
Ben Simons / Tara Benniman / Peter Jacob
Tel: +44 (0)20 7390 0234
About East Star Resources Plc
East Star Resources is focused on the discovery and development
of gold, rare earth, and copper deposits in Kazakhstan. With an
initial nine licences covering 1,687 sq km in three mineral rich
districts, East Star is undertaking an intensive exploration
programme, applying modern geophysics to discover minerals in
levels that were not previously explored. The Company also intends
to further expand its licence portfolio in Kazakhstan. East Star's
management are based permanently on the ground, supported by local
expertise, and joint ventures with the state mining company.
Follow us on social media:
LinkedIn: www.linkedin.com/company/east-star-resources/
Twitter: www.twitter.com/EastStar_PLC
Subscribe to our email alert service to be notified whenever
East Star releases news: www.eaststarplc.com/newsalerts
The person who arranged for the release of this announcement was
Alex Walker, CEO of the Company.
Chairman's Statement
On 10 January 2022, East Star announced it had raised gross
proceeds of GBP3.1 million by way of an oversubscribed placing and
subscription and had been readmitted to the Official List of the
London Stock Exchange by way of a Standard Listing following its
acquisition of 100% of the share capital of Discovery Ventures
Kazakhstan Limited ("DVK") (the "Acquisition"). As a result of the
Acquisition, East Star owns 100% of DVK which was formed for the
purpose of identifying and developing gold and base metals projects
in prospective regions of Kazakhstan.
Kazakhstan has a rich mining history for gold and base metals
but is relatively underexplored and has lacked modern exploration
since independence from the Soviet Union in 1991. The Board
believes the exploration and development opportunities offered by
the Company's projects has the potential to generate significant
value for shareholders.
The Company's strategy is built on three main pillars:
-- Identify highly prospective exploration ground and
brownfields projects in known mineral districts with demonstrated
historical exploration success and limited application of modern
exploration techniques
-- Develop proven and out-of-the-box concepts for potential
mineral targets and efficiently conduct exploration by application
of state-of-the-art methods and equipment
-- Partner with existing companies via joint venture or farm-in
Management have worked well with our partners and stakeholders
in Kazakhstan. Indeed, on 20 April 2022 the Company announced that
all four exploration licences under the joint venture with
Kazakhstan national mining company Tau-Ken Samruk were transferred
to newly established joint venture companies within the Astana
International Financial Centre (AIFC) owned 80% by DVK and 20% by
Tau-Ken Samruk.
Chu-Ili Orogenic Gold Belt Licences - Apmintas and Dalny
On 26 January 2022, the Company announced the first batch of
assay results from reconnaissance Reverse Circulation (RC) drilling
undertaken in September 2021 on the Apmintas Licence. The results
showed outstanding high-grade intersections including a "discovery
hole" at the first drill target at Novoe returning 63m at 4.51 g/t
Au from surface including 19m at 14.36 g/t from 44m. On 16 May
2022, the Company announced further assay results from RC drilling
in September 2021 on the Apmintas Licence. Highlights included 14m
at 2.54 g/t Au from 40m on the Eshkilitau II target. Anomalous gold
was recorded across all Eshkilitau occurrences, confirming a gold
bearing system with a strike of more than 4km.
This and other data were processed to determine strike extent
and direction and are being used in planning the diamond drilling
exploration which commenced on 25 July 2022 ("2022 Drill
Campaign").
On 3 February 2022, the Company announced the acquisition of
additional historic data which added a new
target - Southern Shabdar - to the 2022 Drill Campaign.
Historical results included:
-- 24.9m @ 2.86 g/t Au
-- 8.2m @ 13.0 g/t Au
-- 5m @ 4.89 g/t Au from 53m
-- 1m @ 24.8 g/t Au from 15m and 2m @ 39.3 g/t Au from 28m; and
-- 2m @ 39 g/t Au from 275m downhole
On 7 March 2022, the Company announced the completion of
processing of 481 square kilometres of close spaced drone magnetics
flown in September 2021 over the Dalny Licence. This has resulted
in 11 target areas prospective for gold mineralisation being
identified along structurally prospective sections of the
first-order, deep-crustal faults totalling more than 50km of
strike.
On 8 March 2022, the Company announced historical drill results
acquired over the Eshkilitau II target on the Apmintas Licence.
Based on the Company's analysis, Eshkilitau II was added as a
target for the 2022 Drill Campaign. Historical results
included:
-- 1m @ 7.86 g/t Au from 27m
-- 1m @ 7.00 g/t Au from 5m
-- 2.8m @ 4.67 g/t Au from 19m
-- 1m @ 4.62 g/t Au from 25m
-- 4m @ 2.04 g/t Au from 47m and 1.3m @ 8.2 g/t from 122.7m
-- 6m @ 1.6 g/t from 61m
-- 2m @ 28.8 g/t Au from 196m; and
-- 7m @ 1.34 g/t Au from 37m and 1m @ 13.61 g/t Au from 53m
On 13 April 2022, the Company announced the completion of
processing of 380km(2) of close spaced drone magnetics flown
between July and October 2021 over the Apmintas Licence. Highlights
included:
-- 22 targets highlighted for follow up work - most of which are under 10-30m of cover
-- Majority of targets represent structural settings for classic
orogenic gold mineralisation including duplex structures, flexures
and step-over zones along second and third order structures
-- 9 targets with historical gold occurrences including Novoe,
Southern Shabdar and Eshkilitau II with previously announced high
grade gold intersections from drilling
-- Another 9 targets have existing historical geochemical
anomalies of known gold pathfinder elements including arsenic,
antimony, bismuth and copper
On 30 June 2022, after the period end, the Company announced
high grade assay results from rock chip samples taken during
geological surveys over the Alatagyl target on the Dalny
Licence.
The 2022 Drill Campaign got underway on 25 July 2022 and aims to
extend past intersections and grades along strike and at depth,
with the potential to discover economic deposits from exploration
of only a small part of the Apmintas Licence. By using diamond
core, work can also be undertaken on the minerology and metallurgy
including conducting 'gravity recovered gold' testing to begin
establishing a processing route for eventual production.
On 18 August 2022, the Company announced an interim drilling
update on the Apmintas licence detailing the completion of four
boreholes totalling 970 metres being drilled on the Novoe target.
The boreholes showed wide intersections of quartz diorite
containing interspersed quartz veining and sulphides with some more
intense sections of alteration.
Rudny Altai VMS Licences
On 25 May 2022, the Company announced the commencement of a
helicopter electromagnetic ("HEM") survey on the Company's Rudny
Altai volcanogenic massive sulphide ("VMS") licences in Eastern
Kazakhstan. The survey was completed on 6 July 2022, with data
processing and technical review and targeting currently underway.
The execution of the survey was excellent, with the survey
completing faster, and at a significantly lower cost, than
originally budgeted. The results from the survey are expected to
provide East Star with some immediately drill-ready targets and
targets requiring further field and geophysical work prior to
drilling.
It is expected that these targets will be identified by the end
of 2022 with initial drilling to be conducted during the field
season of 2023.
On 15 August 2022, after the period end, the Company announced
the award of three new licences on the Rudny Altai VMS belt,
incorporating two historic operating copper-lead-zinc mines, one
known deposit, and many historical mineral occurrences.
We're extremely excited by these licences as the grades of mines
in the region could be considered world class and the
infrastructure for development including labour, rail, road, power,
water, processing facilities and smelters are all within the very
near vicinity.
Talairyk Ionic Adsorption Clay (IAC) Heavy Rare Earth Elements
(HREE) Project
On 18 May 2022, the Company announced a farm-in to the Talairyk
Licence - an IAC Heavy Rare Earth Element project in the Kostanay
region of Kazakhstan. The Talairyk Licence is 10km(2) and
represents a low-cost entry to a geologically de-risked IAC hosted
HREE deposit, with 19,962 tonnes of contained Total Rare Earth
Oxides (TREO) including 4,300 tonnes of yttrium oxide at an average
of 7.5m from surface (1994 resource model). The deposit bears the
same geochemical signature as the IACs of South China from where
most of the world's HREEs are currently supplied. There is a
database which includes 128 core holes and 61 auger holes for 3,755
samples. The Company's JV partner is Phoenix Mining whose team
includes a senior mining executive and a leading lawyer in
Kazakhstan.
This farm in represents why East Star is exploring in
Kazakhstan. There are very few places in the world where a company
can find a project of this quality and potential and with this
amount of data that has not undergone any work since 1994.
After period end, on 8 August 2022, the Company announced the
award of a new exploration licence comprising 59 blocks ("Talairyk
1") which now forms part of the Talairyk HREE Project.
Talairyk 1 covers 134.7km(2) and is contiguous with the 10km(2)
Talairyk Licence. Talairyk 1 will be included in the farm-in
agreement with Phoenix Mining, with East Star expenditure on
Talairyk 1 also contributing towards the agreed earn-in
milestones.
Key East Star Financial Indicators
- Cash and cash equivalents at period end: GBP3.2 million
- Loss before taxation for the period: GBP2.1 million (includes
GBP1.6 million share based payments (non-cash) on acquisition of
DVK)
- Net cash flow for the period of GBP1.9 million
- Net assets of GBP4.5 million
Summary
I would like to finish by thanking Alex Walker and his senior
management team based in Almaty for their excellent progress, as
well as my fellow Board members and our shareholders for their
support as we travel this exciting journey of building this unique
opportunity into a profitable company.
Responsibility Statement
We confirm that to the best of our knowledge that the Interim
Report:
-- has been prepared in accordance with International Accounting
Standards 34, Interim Financial Reporting;
-- gives a true and fair view of the assets, liabilities,
financial position and profit/loss of the Company;
-- includes a fair review of the information required by DTR
4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the set of
interim financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
-- includes a fair review of the information required by DTR
4.2.8R of the Disclosure and Transparency Rules, being the
information required on related party transactions.
The Interim Report was approved by the Board of Directors and
the above responsibility statement was signed on 22 August
2022.
......................................
Sandy Barblett - Chairman
EAST STAR RESOURCES PLC - CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTH PERIODING 31 MAY 2022
Unaudited Unaudited Unaudited
Period ending Period ending
31 May 31 May Year ended 31 December
2022 2021 2021
Note GBP'000 GBP'000 GBP'000
Continuing
Operations
Administrative
expenses (399) (74) (80)
Operating loss (399) (74) (80)
-------------------- ----- ------------------------- ------------------------------ ------------------------------
Finance Income (93) - -
Reverse acquisition
expense 7 (1,626) - -
Loss before
taxation 4 (2,118) (74) (80)
-------------------- ----- ------------------------- ------------------------------ ------------------------------
Other comprehensive
income 91 2 (4)
Total comprehensive
loss for the year
attributable to
shareholders from
continuing
operations (2,027) (72) (84)
-------------------- ----- ------------------------- ------------------------------ ------------------------------
Basic & dilutive
earnings per share
- (GBP pence) (1.435) (168.412) (133.194)
-------------------- ----- ------------------------- ------------------------------ ------------------------------
The notes form an integral part of the Condensed Consolidated
Interim Financial Statements
EAST STAR RESOURCES PLC - CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2022
Unaudited Unaudited Unaudited
As At As At As At
31 May 31 May 31 December
2022 2021 2021
Note GBP'000 GBP'000 GBP'000
NON-CURRENT ASSETS
Fixed assets 26 22 25
Intangibles 6 1,039 - -
TOTAL NON-CURRENT
ASSETS 1,065 22 25
------------------- ----- ------------------------------ ---------------------------- ----------------------------
CURRENT ASSETS
Cash and cash
equivalents 3,205 154 16
Trade and other
receivables 327 89 941
Other current
assets - 95 72
TOTAL CURRENT
ASSETS 3,532 338 1,029
------------------- ----- ------------------------------ ---------------------------- ----------------------------
TOTAL ASSETS 4,597 360 1,054
------------------- ----- ------------------------------ ---------------------------- ----------------------------
EQUITY
Share capital 9 1,823 51 51
Share premium 9 5,905 132 132
Share based
payment reserve 10 106 - -
Share capital to
be issued 7 3,750 - -
Foreign exchange
reserve 93 (2) 2
Reverse
acquisition
reserve 7 (4,932) - -
Retained earnings (2,198) (75) (80)
Non controlling
interest (0.03) - -
TOTAL EQUITY 4,547 106 105
------------------- ----- ------------------------------ ---------------------------- ----------------------------
NON-CURRENT
LIABILITIES
Borrowings - 235 863
TOTAL NON-CURRENT
LIABILITIES - 235 863
-------------------------- ------------------------------ ---------------------------- ----------------------------
CURRENT
LIABILITIES
Trade and other
payables 50 19 86
TOTAL CURRENT
LIABILITIES 50 19 86
------------------- ----- ------------------------------ ---------------------------- ----------------------------
TOTAL LIABILITIES 50 254 949
------------------- ----- ------------------------------ ---------------------------- ----------------------------
TOTAL EQUITY AND
LIABILITIES 4,597 360 1,054
=================== ===== ============================== ============================ ============================
The notes form an integral part of the Condensed Consolidated
Interim Financial Statements.
The Condensed Consolidated Financial Statements were approved
and authorized by the Board of Directors on 22 August 2022:
..................................
Sandy Barblett - Non Executive Chairman
EAST STAR RESOURCES PLC - CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
FOR THE 6 MONTH PERIODING 31 MAY 2022
Share Share
based Foreign Reverse Capital
Share Share payment exchange acquisition to be Retained Total
Capital Premium reserve reserve reserve issued Earnings NCI Equity
GBP'000
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Balance at 1
December 2020 0.07 - - - - - (0.6) - (0.5)
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Loss for
period - - (74) - (74)
Other
comprehensive
income - - (2) - - - - (2)
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Total
comprehensive
income for
year - - (2) - - (74) - (76)
Transactions
with owners in
own capacity
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Ordinary
shares issued 51 132 - - - - - 183
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Transactions
with owners
in own
capacity 51 132 - - - - - 183
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Balance at 31
May 2021 51 132 (2) - - (75) - 106
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Loss for
period - - - - - (5) - (5)
Other
comprehensive
income - - - 4 - - - - 4
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Total
comprehensive
income for
year - - - 4 - - (5) - (1)
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Balance at 31
December 2021 51 132 2 - - (80) - 105
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Loss for
period - - - - - - (2,118) - (2,118)
Other
comprehensive
income - - - 91 - - - - 91
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Total
comprehensive
income for
year - - - 91 - - (2,118) - (2,027)
Transactions
with owners in
own capacity
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Ordinary
shares issued 1,373 4,210 - - - - - 5,583
Broker
warrants
issued - - 58 - - - - - 58
Employee
options
issued - - 48 - - - - - 48
Share issue
costs - (105) - - - - - - (105)
Recognition of
PLC equity at
acquisition
date - - - - (473) - - - (473)
Remove share
capital of
DVK (51) (132) - - 183 - - - -
Issue of
shares for
acquisition
of subsidiary 450 1,800 - - (6,268) 3,750 - - (268)
Reverse
acquisition
of DVK - - - - 1,626 - - - 1,358
Account for
NCI on
incorporation
of new
entities - - - - - - - (0.03) (0.03)
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Transactions
with owners
in own
capacity 1,772 5,772 106 - (4,932) 3,750 - (0.03) 6,562
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
Balance at 31
May 2022 1,823 5,905 106 93 (4,932) 3,750 (2,198) (0.03) 4,547
--------------- --------- ---------- --------- --------- ------------ ---------- --------- ------- ----------
EAST STAR RESOURCES PLC - CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
STATEMENT OF CASHFLOWS
FOR THE 6 MONTH PERIODING 31 MAY 2022
Unaudited Unaudited
6 month period 6 month period
ended ended
31 May 31 May
2022 2021
GBP'000 GBP'000
Cash flow from operating
activities
Loss for the financial year (2,118) (74)
Adjustments for:
Share based payment on reverse
acquisition 1,626 -
Share based payment reserves 82 -
Foreign exchange 126 2
Listing expenses settled in
shares 18 -
Changes in working capital:
Decrease / (increase) in trade
and other receivables 346 (189)
Increase / (decrease) in trade
and other payables (158) 19
Net cash outflow from operating
activities (78) (242)
Cash flows from investing
activities
Investment in fixed assets (0.8) (22)
Spend on exploration assets (1,039) -
Net cash flow from investing
activities (1,040) (22)
-------------------------------- ----------------------------------------- -----------------------------------------
Cash flows from financing
activities
Proceeds from Issue of Shares 3,100 178
Share Issue Costs (105) -
Borrowings - 222
Net cash flow from financing
activities 2,995 400
-------------------------------- ----------------------------------------- -----------------------------------------
Net increase in cash and cash
equivalents 1,877 136
Cash and cash equivalents at
beginning
of the period 1,353 1
Foreign exchange impact on cash (25) 17
Cash and cash equivalents at
end
of the period 3,205 154
-------------------------------- ----------------------------------------- -----------------------------------------
EAST STAR RESOURCES PLC - CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 6 MONTH PERIODING 31 MAY 2022
1 General information
East Star Resources Plc was incorporated under the Companies Act
2006 on 17 November 2020 in England and Wales under the name Cawmed
Resources Limited and remains domiciled there with Registered
Number 13025608. The Company subsequently changed its name to East
Star Resources Limited on 27 January 2021 and on 3rd March 2021
re-registered as a plc. The following condensed consolidated
interim financial statements are consolidated to include the
Company and all its subsidiaries ("Group").
The address of its registered office is Eccleston Yards, 25
Eccleston Place, London SW1W 9NF, United Kingdom.
The principal activity of the Group is to explore opportunities
in the natural resources sector specifically in relation to gold
and copper extraction. The Group has taken significant steps in the
period with the acquisition of Discovery Ventures Kazakhstan
("DVK"), a Kazakhstan based subsidiary which jointly holds multiple
exploration licenses.
The Company was suspended from trading on 19th July 2021 whilst
managing a reverse takeover transaction and was then re-admitted to
trading on 10th January 2022.
2 Accounting policies
IAS 8 requires that management shall use its judgement in
developing and applying accounting policies that result in
information which is relevant to the economic decision-making needs
of users, that are reliable, free from bias, prudent, complete and
represent faithfully the financial position, financial performance
and cash flows of the entity.
2.1 Basis of preparation
The condensed consolidated interim financial statements
("interim financial statements") have been prepared in accordance
with International Accounting Standard 34 "Interim Financial
Reporting" (IAS 34). The interim financial statements have been
prepared on the historical cost basis, except for assets and
liabilities measured at fair value through profit and loss, and are
presented in pounds sterling, which is the currency of the primary
economic environment in which the Company operates. All amounts
have been rounded to the nearest pound, unless otherwise
stated.
The interim financial statements have not been audited but the
Company has engaged the Company's auditors to perform a limited
scope review in accordance with the International Standard on
Review Engagements 2410 issued by the Auditing Practices Board. The
interim financial statements do not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006. The
figures have been prepared using applicable accounting policies and
practices consistent with those adopted in the audited annual
financial statements for the year ended 30 November 2021.
The interim financial statements are for the six months to 31
May 2022, being six months from the financial year end for the
Company being 30 November 2021. The interim financial statements do
not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with
the Company's annual audited financial statements for the period
ended 30 November 2021. The Company has prepared the interim
financial statements using reverse acquisition methodology and
therefore has presented the comparatives for the accounting
acquirer (legal subsidiary - DVK). As per IAS 34 the comparative
data for the comparable year-to-date period has been presented as
well as the year-to-date figures for the immediately preceding
financial year being 31 December 2021.
The functional currency for each entity in the Group is
determined as the currency of the primary economic environment in
which it operates. The functional currency of the parent company,
East Star Resources is Pounds Sterling (GBP) as this is the
currency that finance is raised in. All subsidiaries are based in
Kazakhstan and the functional currencies of these subsidiaries is
Kazakhstan Tenge. All subsidiaries are required to report in United
States Dollars ($) and this is the presentational currency of all
subsidiaries. The presentational currency of the Group is Pounds
Sterling (GBP).
The business is not considered to be seasonal in nature.
New standards, amendments and interpretations adopted by the
Group
During the current period the Group adopted all the new and
revised standards, amendments and interpretations that are relevant
to its operations and are effective for accounting periods
beginning on 1 December 2021. This adoption did not have a material
effect on the accounting policies of the Group.
New standards, amendments and interpretations not yet adopted by
the Group.
The standards and interpretations that are relevant to the
Group, issued, but not yet effective, up to the date of these
interim Financial Statements have been evaluated by the Directors
and they do not consider that there will be a material impact of
transition on the financial statements.
2.2 Principal risks and uncertainties
During the period the Company successfully completed the
acquisition of DVK and the incorporation of two new subsidiaries
all of which are based in Kazakhstan. Due to these new operating
jurisdictions the principal risks pertaining to the Company and its
business operations have changed materially.
An outline of the new risks attributable to the Group are listed
below:
i) Jurisdictional & Political Risk
The Company is now operating in Kazakhstan and while the country
has been stable for a sustained period it did experience some
political unrest in early 2022. This has since been resolved and
political stability has returned to the nation with the operations
of the Company being unaffected. The level of risk is constantly
monitored by the CEO who is based in country allowing for an
appropriate and timely response to any chance in the risk
exposure.
ii) Operational Risk
The Company is now actively pursuing exploration activities in
Kazakhstan. As well as the general risks involved with exploration
activities the Company holds exploration licenses jointly with Tau
Ken Samruk which is the holding company for the Kazakh government's
stakes in mining operations. Dealing with multiple governments
across multiple jurisdictions is a new risk for the Company however
the Company is comfortable that the team of advisors in place has
the requisite skills to deal with any issues that may arise.
iii) Currency Risk
Post acquisition of DVK a significant proportion of the Group's
operational costs will be denominated in Kazakhstan's tenge however
market prices for commodities that will hopefully be extracted will
be determined is US Dollars. Consequently changes in the exchange
rates of these currencies could positively or negatively impact
cash flows. As the Company has not begun to extract and sell
commodities any potential impact is limited currently to
expenditure and the Directors believe that this level of risk is
acceptable to the Company at this time.
2.3 Leases
As Per IFRS 16 leases are required to be recognised as a
right-of-use asset and a corresponding lease liability at the date
at which the leased asset is available for use unless the Group
chooses to utilize an exemption. The Group entered into two leases
on 1 March 2022 and will be treating the leases on a straight line
basis as an expense in the profit or loss as per the short-term
lease exemption for leases with terms of 12 months or less.
2.4 Going concern
The directors have assessed the Company's ability to adopt the
going concern basis of accounting and consider the adoption to be
appropriate in the preparation of the interim financial statements.
Currently the Company has cash and cash equivalents of GBP3,205,489
and its only major committed expenditure relates to minimum spend
commitments on licenses which equates to around GBP450,000 for the
upcoming year. This combined with a current average cash burn rate
across the group of around GBP35,000/month supports the fact that
the Company will not have any liquidity issues in the near
future.
Management have prepared in depth budgets and cash flow analysis
to support their assumptions and hence are confident in the
adoption of the going concern basis for the Company.
2.5 Risks and uncertainties
The Directors continuously assess and monitor the key risks of
the business. As a result of the acquisition of DVK and the Group
now actively pursuing exploration activities the risk profile of
the Group has changed materially. This is addressed in the
Chairman's Statement with new and pertinent risks highlighted.
Overall the Board feels that the team and risk mitigation factors
that are in place are sufficient to reasonably deal with any risks
that may arise.
3 Critical accounting estimates and judgements
In the application of the Company's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the financial statements, are disclosed below:
i) Share Based Payments: In the period the Company issued
warrants and the directors have applied the Black-Scholes pricing
model to assess the costs associated with the share-based payments.
These have been valued using the same methodology as warrants
valued and audited in previous periods.
ii) Reverse acquisition: During the period the Company acquired
the entire share capital of DVK. The board of directors determined
that the transaction constituted a reverse takeover but not a
business combination per the criteria detailed in IFRS 3. For more
detail on the transaction refer to note 7.
iii) Intangible assets: the Group has begun to allocate costs to
the various licenses held. These costs have only recently been
incurred and there are no indicators present to suggest evidence of
impairment. The directors have assessed that they are unlikely to
be impaired at this stage but will continue to assess whether
indicators arise in the future and performing testing if
required.
4 Segment reporting
The Chief Operating Decision Maker is the Board of Directors.
The Board reviews the Group's internal reporting in order to assess
performance of the Group. Management has determined the operating
segments based on the reports reviewed by the Board.
The Board considers that during the six month period ended 31
May 2022, the Group operated in two business segments, the
Corporate segment based in the United Kingdom ("Corporate"), and
the exploration activities based in Kazakhstan ("Exploration").
Contributions per segment to loss before taxation are detailed
below:
Corporate Exploration Group
2022 GBP'000 GBP'000 GBP'000
Consultancy expense (88) (52) (140)
Professional fees (24) - (24)
Administrative expenses (138) (14) (152)
Salary expense (49) - (49)
Finance cost - (93) (93)
Exploration costs - - -
Bank charges - - -
Foreign Exchange (3) (31) (34)
Other Expenses - - -
Share based payments (Note 7) (1,626) - (1,626)
(1,928) (190) (2,118)
----------------- -------------------------- --------------------------
5 Earnings per share
The calculation for basic and diluted earnings per ordinary
share is based on the total comprehensive loss after income tax
attributable to equity shareholders for the period and is as
follows:
Unaudited Unaudited Unaudited
6 month period ended 6 month period ended Year
31 May 31 May ended 31 December
2022 2021 2021
Net loss for the period
attributable to ordinary equity
holders for continuing
operations
(GBP'000) (2,027) (72) (84)
Weighted average number of
ordinary shares in issue 141,193,801 42,550 62,650
--------------------------------- --------------------------- -------------------------- --------------------------
Basic and diluted earnings per
share for continuing operations
(pence) (1.435) (168.412) (133.194)
--------------------------------- --------------------------- -------------------------- --------------------------
Earnings per ordinary share are calculated using the weighted
average number of ordinary shares in issue during the period. A
loss was made during the period and therefore basic EPS is equal to
the diluted EPS.
6 Intangibles
The intangible assets held by the Group increased as a result of
spending on exploration assets
Total
GBP'000
--------------------------------- --------
Cost and carrying amount
At 1 December 2021 -
Additions:
Additions to exploration assets 1,039
As at 31 May 2022 1,039
--------------------------------- --------
In the period the Group has begun allocating costs against two
of its four exploration licenses (Apmintas & Dalny) as it
begins preparation for exploration activities. Per IFRS 6 entities
are required to perform impairment testing on exploration and
evaluation assets when the circumstances indicate that there may be
evidence of impairment. To this stage there have been no such
indicators of impairment and hence the directors have not performed
substantial impairment testing but will continue to monitor and
test if required.
7 Reverse acquisition
1. Discovery Ventures Kazakhstan ("DVK")
On 10 January 2022, the Company acquired, through an issue of
45,000,000 consideration shares the entire share capital of DVK,
whose principal activity is to undertake exploration activities
relating to gold and copper mineral resources in Kazakhstan.
Although the transaction resulted in DVK becoming a wholly owned
subsidiary of the Company, the transaction constitutes a reverse
acquisition as in substance, it has resulted in a fundamental
change in the business of the Company with the sole director of DVK
becoming the Chief Executive Officer of the Company. Thus, the
executive management of DVK now exerts significant influence over
the executive management of the Company.
The shareholders of DVK acquired a 32.73% interest in the
Company representing a controlling interest. The transaction has
therefore been accounted for as a reverse acquisition. As the
Company's activities prior to the acquisition were purely the
maintenance of the Main Market LSE Listing, acquiring DVK and
raising equity finance to provide the required funding for the
operations of the acquisition the directors did not consider this
to meet the definition of a business in accordance with IFRS 3.
Accordingly, this reverse acquisition does not constitute a
business combination. Although, the reverse acquisition is not a
business combination, the Company has become a legal parent and is
required to apply IFRS 10 and prepare consolidated financial
statements. The Directors have prepared these financial statements
using the reverse acquisition methodology, but rather than
recognising goodwill, the difference between the equity value given
up by the DVK shareholders and the share of the fair value of net
assets gained by the DVK shareholders is charged to the statement
of comprehensive income as a share-based payment on reverse
acquisition, and represents in substance the cost of acquiring a
Main Market LSE listing.
In accordance with reverse acquisition accounting principles,
these consolidated interim financ ial statements represent a
continuation of the consolidated statements of DVK and its
subsidiaries and include:
- The assets and liabilities of DVK and its subsidiaries at
their pre-acquisition carrying value amounts and the results for
both periods; and
- The assets and liabilities of the Company as at 10 January
2022 and its results from the date of the reverse acquisition on 10
January 2022 to 31 May 2022.
On 10 January 2022, the Company issued 45,000,000 ordinary
shares to acquire the entire share capital of DVK. On the same
date, the Company was readmitted to the Main Market of the LSE,
after completing its second placing round with a placing share
price of GBP0.05 and therefore the Company has valued the
investment in DVK at GBP6,000,000. (This figure includes both the
initial consideration mentioned above as well as the contingent
consideration on completion milestones - Note 11).
Because the legal subsidiary, DVK, was treated on consolidation
as the accounting acquirer and the legal Parent Company, East Star,
was treated as the accounting subsidiary, the fair value of the
shares deemed to have been issued by DVK was calculated at
GBP3,372,698 based on an assessment of the purchase consideration
for a 100% holding of East Star of 69,540,164 shares at a weighted
average placing price of GBP0.0485 per share (being the share price
of East Star immediately before the acquisition).
The fair value of the net assets of East Star at acquisition was
as follows:
GBP'000
Cash and cash equivalents 1,835
Convertible loan notes 609
Other receivables 151
Share capital to issue (694)
Trade creditors (148)
Other payables (6)
Net assets 1,747
---------------------------- --------------
The difference between the deemed cost (GBP3,372,698) and the
fair value of the net assets assumed above of GBP1,747,053 resulted
in GBP1,625,644 being expensed within "reverse acquisition
expenses" in accordance with IFRS 2, Share Based Payments,
reflecting the economic cost to DVK shareholders of acquiring a
quoted entity.
The reverse acquisition reserve which arose from the reverse
takeover is made up as follows:
GBP'000
Pre-acquisition equity(1) (473)
DVK share capital at acquisition(2) 183
Investment in DVK(3) (6,268)
Reverse acquisition expense(4) 1,626
(4,932)
------------------------------------- --------------
1. Recognition of pre-acquisition equity of East Star as at 10 January 2022.
2. DVK had issued share capital and share premium of GBP182,728.
As these financial statements present the capital structure of the
legal parent entity, the equity of DVK is eliminated.
3. The value of the shares issued by the Company in exchange for
the entire share capital of DVK. The above entry is required to
eliminate the balance sheet impact of this transaction.
I. Initial consideration: 45 million shares at GBP0.05 (GBP2,250,000)
II. Contingent consideration: 75 million shares at GBP0.05 (GBP3,750,000)
III. Convertible loan notes settled on behalf of DVK (GBP267,500)
4. The reverse acquisition expense represents the difference
between the value of the equity issued by the Company, and the
deemed consideration given by DVK to acquire the Company.
8 Investments
i) Discovery Ventures Kazakhstan Ltd
As detailed above on 10 January 2022 the Company acquired the
entire share capital of DVK. The Company issued 45,000,000 shares
as consideration for 100% of the DVK share capital.
ii) Chu Ili Resources Ltd
On the 9(th) February 2022 Chu Ili Resources Ltd ("Chu Ili") was
incorporated in accordance with the Constitutional Law of the
Republic of Kazakhstan under the identification number
220240900118. On incorporation the shareholdings of Chu Ili were
split 80% DVK and 20% Tau-Ken Samruk JSC ("TKS") which is the
holding company for the Kazakh government's stake in mineral mining
operations. The share capital and total net assets of Chu Ili on
incorporation was $100.
iii) Rudny Resources Ltd
On the 9(th) February 2022 Rudny Resources Ltd ("Rudny") was
incorporated in accordance with the Constitutional Law of the
Republic of Kazakhstan under the identification number
220240900138. On incorporation the shareholdings of Rudny were
split 80% DVK and 20% TKS. The share capital and total net assets
of Rudny on incorporation was $100.
9 Share capital and share premium
Ordinary Shares Share Capital Share Premium Total
# GBP'000 GBP'000 GBP'000
---------------- -------------- -------------- --------
As at 1 December 2021 69,540,154 695 1,502 2,197
Issue of ordinary shares (1) 112,710,000 1,128 4,508 5,635
Share issue costs - - (105) (105)
---------------- -------------- -------------- --------
At 31 May 2022 182,250,154 1,823 5,905 7,728
---------------- -------------- -------------- --------
(1) On 10 January 2022 the Company completed the acquisition of
DVK and re-admission to the London Stock Exchange. As part of this
reverse takeover transaction the Company issued 112,710,000 shares
at a subscription price of GBP0.05 to raise GBP3.1million. The
remaining shares were issued to the shareholders of DVK as part of
the consideration for the acquisition (see Note 7).
10 Share based payments reserve
The following warrants over ordinary shares have been granted by
the Company and are outstanding at period end:
As at
31 May 2022 GBP'000
Advisor warrants issued 58
Employee options issued 48
---------------------
Total 106
---------------------
1) Warrants
Number of Warrants Exercise Price Expiry date
----------------------------- ------------------- --------------- ----------------
On incorporation
Issued on 16 March 2021 6,000,000 GBP0.05 4 May 2023
Issued on 4 May 2021 1,200,000 GBP0.05 4 May 2024
Issued on 10 January 2022(1) 5,467,505 GBP0.05 10 January 2027
Issued on 10 January 2022(2) 2,146,000 GBP0.05 10 January 2025
------------------- ---------------
At 31 May 2022 14,813,505 GBP0.05
------------------- ---------------
(1) On 10 January 5,467,505 warrants were issued to advisors and
have been fair valued at GBP26,322 in accordance with IFRS 2 at the
fair value of the services received. This amount is attributable to
the cost of re-admission to the LSE and therefore has been
accounted for in the Share based payments reserve.
(2) On 10 January 2,146,000 warrants were issued to the
Company's broker Peterhouse Capital and have been fair valued at
GBP7,935 in accordance with IFRS 2 at the fair value of the
services received. This amount is attributable to the cost of
re-admission to the LSE and therefore has been accounted for in the
share based payments reserve.
2. Options
Number of Options Exercise Price Expiry date
------------------------------ ------------------ --------------- -----------------
On incorporation
Issued on 13 December 2021(1) 11,250,000 GBP0.05 13 December 2026
At 31 May 2022 11,250,000 GBP0.05
------------------ ---------------
(1) On 13 December 2021 11,250,000 employee options were
granted. These options have an exercise price of GBP0.05 and expire
5 years from the grant date. The option vesting details are listed
below:
Vesting Trigger for Vesting Number of options vested
Event on date of vesting
1 Six months from the date One third of the total options
of RTO admission issued
------------------------------- -------------------------------
2 Share price traded at GBP0.075 One third of the total options
for at least 5 consecutive issued
days
------------------------------- -------------------------------
3 Share price traded at GBP0.10 All remaining unvested options
for at least 5 consecutive not having vested following
days vesting event 1 & 2
------------------------------- -------------------------------
11 Financial commitments & contingent liabilities
Exploration licenses minimum spend commitments
The four licenses held by the Group have minimum spend
commitments. These are detailed below:
License area Commencement Date Finish Date Owner Number of blocks Annual Minimum
Expenditure (GBP'000)
Apmintas 8/26/2020 8/25/2026 Chu-ili Resources 110 82
------------------- ------------- ------------------- ----------------- --------------------------
Dalny 6/27/2020 6/26/2026 Chu-ili Resources 196 141
------------------- ------------- ------------------- ----------------- --------------------------
Novo 2 10/7/2020 10/6/2026 Rudny Resources 148 108
------------------- ------------- ------------------- ----------------- --------------------------
Novo 1 11/5/2020 11/4/2026 Rudny Resources 159 115
------------------- ------------- ------------------- ----------------- --------------------------
Leases
The Company entered into the following leases as per the terms
below:
i) Rudny Resources - Working Space Office
12 Month term commencing on 1 March 2022
Total outlay: 132,000 KZT (Approx GBP230 GBP)
ii) Chu Ili Resources - Working Space Office
12 Month term commencing on 1 March 2022
Total outlay: 132,000 KZT (Approx GBP230 GBP)
Contingent Consideration on Acquisition of DVK
In addition to the initial consideration exchanged the sellers
of DVK shall have the right to receive a further 75 million
performance shares based on the completion of the following
performance milestone:
-- Confirmation of a mineral resource on one of the licenses of
at least one million ounces of gold equivalent at an average grade
of at least two grammes per ton of gold equivalent as defined by an
independent professional firm appointed by the Company to either
JORC Code or NI 43-101 classification standards
12 Related party transactions
Equity issued to Directors & Director related entities
As a result of the acquisition of DVK 19,124,522 shares were
issued to Director Alex Walker.
As part of the placement accompanying the re-admission of the
Company to the London Stock Exchange directors of the Company were
issued with the following shares:
- Alex Walker: 900,000
- Anthony Eastman: 100,000
- David Minchen: 200,000
- Sandy Barblett: 400,000
In addition Orana Corporate LLP of which Anthony Eastman is a
director was issued 5,816,005 warrants in relation to the admission
as consideration for corporate finance services.
Provision of services
During the period, GBP99,640 was paid to Orana Corporate Llp.
GBP26,500 was incurred for the provision of administrative and
corporate accounting services and GBP73,140 was incurred for
corporate finance services related to the re-admission. Anthony
Eastman is a director of the Company and a partner of Orana
Corporate Llp.
Other than these there were no other related party
transactions.
13 Events subsequent to period end
There were no material events subsequent to period end that
require disclosure.
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END
IR BLGDIGUDDGDD
(END) Dow Jones Newswires
August 23, 2022 02:00 ET (06:00 GMT)
East Star Resources (LSE:EST)
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